European Commission, fearing brain drain to US, takes sharper look at space investment strategy

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WASHINGTON — The European Commission is preparing a series of programs aimed at fostering space startups and encouraging them to stay in Europe rather than leaving for the United States.

Commissioners speaking this week at the Conference on European Space Policy in Brussels said the continued reservations of European investors about financing space startups is hampering Europe’s ability to keep pace with similar startup activity in the United States.

The absence of an effective policy for the European Commission to be first to buy products and services from startups further isolates European “NewSpace” companies from their American counterparts, the commissioners said.

Elżbieta Bieńkowska, a commissioner who oversees industry and entrepreneurship at the European Commission, said a study conducted with the European Investment Bank confirmed what was already believed — that European investors still view space companies as too risky, despite the success many have attracting capital overseas.

“Based on the study, I am calling for design of a smart financing approach,” Bieńkowska said Jan. 22. “The work has already started.”

Bieńkowska listed three steps to improve the financial environment for space startups in Europe:

  • A formation in the next few months of a dedicated space fund with the European Investment Fund that will “mobilize up to 300 million euros of public and private investment.”
  • A joint program with the European Space Agency devoting 100 million euros for in-orbit validation and technology demonstrations.
  • The European Commission’s European Low Cost Space Launch competition — first announced in June — that will award 10 million euros to a small launcher company in 2021.

“This is not about copy-pasting what is happening elsewhere, somewhere else in the world,”  Bieńkowska said. “This is about looking critically at our system and support[ing] our space innovation.”

Maroš Šefčovič, vice president of the European Commission in charge of energy union, praised Bieńkowska’s work, emphasizing the need for additional measures to stem Europe’s brain drain to the U.S.

Visiting space startups in the U.S. always results in a “double feeling,” he said.

“I think I am not exaggerating when I say that 60 or 70 percent of people who are greeting me are from Europe,” Šefčovič said. “These are our scientists. They are [educated] in Europe. They started the business in Europe. They did initial training in Europe, but now they are in the United States working for the companies in the United States.”

Šefčovič said European investors need to be more comfortable with the longer timescales and the larger capital expenditure requirements of space startups compared to other industries.

“A lot of efforts will be required [so] we can create a comparable condition for our young entrepreneurs when they will be deciding if they want to stay or if they want to go,” he said. “We really have to work on that very hard.”

Šefčovič said the European Commission is working on a pilot program for space equity and ways to create more research and development funding for space startups.

He cautioned, however, that money isn’t the only resource space startups need.

“When I am talking to young startups, it is very often they tell me ‘we do not need your grant … we need our first contract,’” he said.

In those discussions, startups often say having the European Commission as a customer would demonstrate demand that they can parlay into private funding, Šefčovič said.

“We will definitely need to progress on innovative procurement,” he said.

Bieńkowska said another option the European Commission can explore is buying launch vehicle capacity — presumably from a European launch provider — and giving it to startups so they can demonstrate their technology in orbit.

“Under the pilot partnership with European Space Agency, every year Europe could buy a launcher and award its capacity to highly innovative projects,” she said. “This would accelerate the innovation in Europe a lot.”